Medicare Advantage Plans Face Increased Scrutiny Amid CMS Audits

May 27, 2025 – By Mary Helen Gillespie

In a significant development for the Medicare Advantage (MA) sector, the Centers for Medicare & Medicaid Services (CMS) has announced an urgent expansion of audits on all Medicare Advantage contracts. This move, unveiled on May 22, 2025, seeks to address longstanding concerns about billing practices and the costs associated with MA plans.

The Landscape of Medicare Advantage

Currently, over 34 million older Americans are enrolled in Medicare Advantage programs, attracted by the promise of lower premiums and enhanced coverage options, which often include vision, dental, and prescription benefits. Despite their popularity, Medicare Advantage plans have been under fire for allegedly costing the federal government more than traditional Medicare, raising alarms about the legitimacy of care denials by private insurers.

Among the 67.3 million individuals enrolled in Medicare, approximately 35 million rely on MA plans, accounting for about $84 billion of the nearly $1 trillion spent annually on federal Medicare.

Rising Concerns About Billing Practices

The financial structure of Medicare Advantage payments has drawn criticism for allowing higher payouts based on the type of benefits provided. For instance, MA plans often receive risk-adjusted payments tied to the severity of diagnoses submitted for their enrollees. This system can create incentives for insurers to engage in practices like "upcoding," where diagnoses might be exaggerated to secure higher reimbursements from the federal government.

To combat potential fraud, CMS conducts extensive Risk Adjustment Data Validation (RADV) audits aimed at verifying the accuracy of diagnoses used for payments. However, as of late May 2025, the CMS is grappling with a backlog in these essential audits, having not completed several reviews spanning multiple years.

Audits and Federal Spending

Historically, the most recent significant recovery of MA overpayments occurred during the audit of payment year 2007, and federal estimates indicate that MA plans could be overbilling governments by about $17 billion annually. Some reports suggest this number could be as high as $43 billion each year, indicating a substantial potential for governmental cost recovery through more thorough auditing practices.

In response to this urgent need for accountability, the Trump Administration has set forth a plan aiming to complete all outstanding RADV audits by early 2026. Key strategies include:

• Enhanced Technology: By deploying advanced systems, CMS aims to efficiently review medical records and identify diagnoses that lack adequate support for reimbursement.

• Workforce Expansion: CMS plans to increase its panel of medical coders from 40 to approximately 2,000 by September 2025. This workforce will manually verify flagged diagnoses, ensuring increased accuracy in billing practices.

• Increased Audit Volume: The agency aims to expand its audit capacity, from reviewing around 60 MA plans annually to covering all eligible plans—around 550 per year. Audit sample sizes are also set to increase significantly.

Affected Insurers

The audits will specifically target four major insurers in the MA market: UnitedHealth Group, Elevance Health, CVS Health’s Aetna, and Humana. The CMS has announced collaboration with the Department of Health and Human Services Office of Inspector General (HHS-OIG) to recover uncollected overpayments identified in past audits.

These audits coincide with broader financial issues within the industry, as many MA plans are reportedly withdrawing coverage from predominantly rural areas due to financial losses. Hospitals and healthcare providers in these regions have struggled as a consequence, often leaving patients with limited access to necessary medical care.

Conclusion

As CMS proceeds with these critical audits, pressure is mounting on Medicare Advantage insurers to adhere to federal requirements and improve transparency in billing practices. This development highlights an ongoing challenge within the Medicare system, as it seeks to balance the financial sustainability of health plans with the care needs of millions of seniors.

For many Medicare recipients, these audits represent a crucial step toward addressing potential inefficiencies and ensuring that all beneficiaries receive fair and adequate healthcare coverage. The outcome of these initiatives may shape the future landscape of Medicare Advantage significantly in the coming years.

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